U.S. consumer spending increased slightly more than expected in October, suggesting the economy retained much of its solid growth momentum early in the fourth quarter, but progress on lowering inflation appears to have stalled in recent months.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4% last month after an upwardly revised 0.6% advance in September, the Commerce Department's Bureau of Economic Analysis said. Economists polled by Reuters had forecast consumer spending would gain 0.3% after a previously reported 0.5% increase in September. Adjusted for inflation, consumer spending edged up 0.1%. Spending was largely driven by strong demand for services, including healthcare, housing and utilities, financial services and insurance, dining out and hotel stays as well as transportation and recreation. Services spending rose 0.5%.

The lack of success in bringing inflation back to the Federal Reserve's 2% target, together with the prospect of higher tariffs on imported goods from the incoming Trump administration, could narrow the scope for interest rate cuts from the U.S. central bank next year.